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If the banners hanging from bridges in the western state of Michoacán this week are to be believed, Mexico's horrific drug war has turned a hopeful corner. The signs declared that one of Mexico's most feared drug cartels, La Familia Michoacana, was disbanding after body blows from a federal offensive that is believed to have killed the group's leader in a shoot-out last month. Alejandro Poiré, security spokesman for the government of Mexican President Felipe Calderón, won't say if he believes La Familia's breakup announcement is on the level, but he insisted, "What is a fact is the weakening and retreat of that criminal organization. We will keep advancing."

If Mexico really is seeing the demise of La Familia, an especially violent and bizarre gang that made its muscle trafficking methamphetamine, or crystal meth, to a voracious U.S. market, it's an advance that Calderón sorely needed. That's because Mexico's latest drug-war death statistics are a step backward: 15,273 drug-related killings last year  a 59% rise over 2009  bringing the total since Calderón took office in December 2006 to 34,612. If his antinarco campaign has actually knocked one of Mexico's seven strongest cartels off the battlefield, and if that helps reduce the body count in 2011, it means he can finally claim progress for a military-based strategy that even stalwart allies like the U.S. have begun to question. "The government seems to have achieved something positive in Michoacán," says Luis Astorga, a drug-war expert at the National Autonomous University in Mexico City. (See "Mexico's Meth Warriors.")

In the same breath, however, monitors like Astorga say the achievements seem to be doing little to stanch the bloodshed. To Calderón's credit, last year saw a robust number of Mexican drug lords captured or killed; but drug-related killing still hit record levels, including a troubling increase in the number of civilian victims. Already in January 2011, Mexico has seen almost 1,000 narcomurders. The problem, says Astorga, is that "the capture of capos doesn't necessarily mean defeat for the cartels. It just means new criminal coalitions, new alignments, and that process can lead to more expansive waves of violence, not less." Calderón officials reject the idea that taking out a drug capo simply means others will take his place, and they insist the worsening spasms of violence will be short-lived and are proof the government is rattling the cartels.

Even if La Familia isn't dissolving, it definitely looks rattled, and that's a significant turnaround for a cartel that just last June ambushed a convoy of federal police on a Michoacán highway, killing 12. But Michoacán, the group's home base, is also Calderón's home state, and it's where he started his crusade against Mexico's proliferating drug cartels in 2006  shortly after La Familia had announced itself by rolling the severed heads of five rivals onto the dance floor of a crowded Michoacán disco. Taking back the state has been a crucially symbolic priority for Calderón, and last month's presumed death of La Familia boss Nazario Moreno, a.k.a. El Más Loco (the Craziest One), seems to have been a crippling psychological blow to the cartel. (See pictures of how La Familia waged its drug holy war.)

La Familia, unlike more veteran narcogroups like the dominant Sinaloa cartel, may have also undone itself by trying to be more than just a meth mafia. El Más Loco wasn't just a drug lord, he was a sort of Christian narcoevangelical who wrote his own bible, which all of La Familia's more than 1,500 members had to read, and who considered his gang a patriotic defender of Michoacán and Mexico. A vicious one at that: perhaps more than any other Mexican cartel, La Familia's criminal calling card was the dismembered bodies of its victims, which it delighted in leaving on town plazas and roadsides.

But La Familia, says Astorga, "believed too much in its own myth," which also led it to believe it could not only pay off or intimidate government and business  it thought it could actually be Mexico's government and business, or at least Michoacán's. Mexican investigators last year estimated that La Familia controlled 83 of the state's 113 municipalities as well as almost a third of its formal commerce. That kind of power would seem to make any criminal group invincible. But as TIME wrote last summer, "If La Familia has an Achilles' heel ... it's the group's desire to rule, not just bribe those who do." Like a corporation that assumes too many unfamiliar ventures, La Familia may well have spread itself too thin, leaving itself vulnerable not only to federal cops and soldiers but also to rival groups like the Pacific South cartel, which is moving north into Michoacán.

Still, it's too early to tell if La Familia is really a shuttered cartel or if the narcomantas (drug-gang banners) appearing in Michoacán this week were "just a ploy on La Familia's part to catch its breath, buy time and make new associations with groups like Sinaloa to stay alive," says Astorga. He notes, for example, that the group has made less than sincere calls for truces with government forces in the past. One test may be whether Michoacán this year sees fewer slayings  and more tourists coming out to see the annual winter arrival of millions of monarch butterflies to the state. If the narcomantas are true, they may be an even more welcome sight hanging from the bridges than the butterflies hanging from the trees.